To our customers,  As the General Manager of the Santa Ynez River Water Conservation District, Improvement District No.1, (“ID No.1”), I wish all of our customers a happy new year.   As 2009 begins, it is time to reflect on the past year’s events, activities, and milestones as well as recognize and appreciate the relationships and interactions with our customers.    Also, I hope that you continue to explore our website which is beneficial in keeping our customers informed about ID No.1, answering questions about various topics of interest, providing up-to-date reports about the current and past events, and offering on-line bill payments.    This last year has been filled with many opportunities and challenges.  I would like to share a few of the more noteworthy ones with you in order to assist in keeping you informed about our operations.     In conducting business on behalf of its customers, the ID No.1’s Board of Trustees hold regular monthly public meetings to discuss and make decisions on such matters as financial conditions and budgetary activities, water supplies, operations, maintenance and expansion of facilities, and policy and procedural matters.  Since ID No.1 is a public agency, it is subject to the Ralph M. Brown Act; an act that generally governs the conduct of open meeting for public agencies.  As such, ID No.1’s meetings and organizational procedures are carried out in full compliance with this act which assures that its activities and actions are performed in a manner that is open and transparent to the public it serves.    For our new customers, and as a refresher for our existing customers, I would like to provide you with some background about ID No.1 and its operations.  ID No.1 serves drinking and agricultural water to over 10,000 customers within its service area, which includes the towns of Santa Ynez, Ballard, and Los Olivos, the City of Solvang and residents in between those areas.  In connection with its water operations, ID No.1 is a member agency of the Central Coast Water Authority and the Cachuma Operation and Maintenance Board and, in addition, ID No.1 has contractual relationships with the Cachuma Conservation and Release Board, the City of Solvang and the County of Santa Barbara.  As a result, ID No.1 has developed a strong portfolio of water resources to draw upon to meet the needs of its customers, including the Santa Ynez Upland Groundwater Basin, the Santa Ynez River, Lake Cachuma and the State Water Project.  Along with the authority to deliver drinking and agricultural water, ID No.1 has other powers it has not exercised over the years, but which are available, such as providing hydroelectricity, flood control, recreation and sewer services.    During the winter storms in 2005, which resulted in the declaration of a State and Federal Flood Emergency, ID No. lost several of its river wells that extract water from the Santa Ynez River alluvium.  ID No.1 has been working to replace the lost water production from these river wells with water produced from new groundwater wells, the last of which is scheduled for completion in early 2009.  ID No.1 was able to obtain reimbursement funds from the California Office of Emergency Services and Federal Emergency Management Agency to pay for the cost of these replacement wells – a savings to our customers of approximately five million dollars.  When appropriate, ID No.1 will repair the river wells to maintain its full portfolio of water resources.   As many customers are aware, the County of Santa Barbara has been developing the Santa Ynez Community Plan and the Santa Ynez Airport Development Plan, both of which are within ID No.1’s service area.  ID No.1 has been working to ensure that its existing water resources are protected and there is adequate water delivery capability to continue to meet the water demand of its existing customers, while addressing these additional needs.          Lake Cachuma and the Santa Ynez River are vital to ID No.1’s sources of water supply.  ID No.1 continues to work directly with the United States Bureau of Reclamation, owner of Lake Cachuma and Bradbury Dam, to ensure that proposed uses adjacent to the Lake and management of the recreational area at the Lake do not adversely impact water supplies.  In addition ID No.1 has worked diligently to preserve its water entitlement from the lake and protect its water resources from the Santa Ynez River while striking a balance with maintaining a healthy river habitat system for the listed steelhead trout.   The State Water Project supplies are an important component of ID No.1’s water sources, in particular as it relates to water supplies for the City of Solvang.  A recent court decision coupled with lower than usual snowfall in the Sierra Nevada has resulted in significantly lower than normal deliveries.  As a result, ID No. 1 has been working with other agencies to obtain alternate supplies which are in addition to its other water resources in order to make up any shortages.  This includes a dry year water transfer from our neighbors to the north, San Luis Obispo County, which helped the City of Solvang avert water shortages this past year.         One activity this last year that bears particular mention is ID No.1’s  development of Assembly Bill 2686 (AB2686) which was introduced by Assemblyman Pedro Nava on behalf of ID No.1.  This bill would have re-named ID No.1 by creating the Santa Ynez Valley Water District, which maintained all the same authority and powers of ID No.1, and helped to improve the provision of water services to ID No. 1’s domestic and agricultural customers.   The bill would have also resolved a long-standing conflict with Santa Barbara County Local Agency Formation Commission (“LAFCo”) over jurisdiction of ID No.1’s annexations and exercise of its latent powers. Since its inception, ID No.1 has been under the jurisdiction of the Santa Ynez River Water Conservation District (“Parent District”), not LAFCo, related to annexation matters.  AB 2686 would have avoided the unnecessary expenditure of ratepayer dollars on costly litigation with LAFCo to resolve this conflict.   AB 2686 was also designed to make a distinction between ID No.1 and the Parent District because of the two entity’s similar powers but very different boundaries and mission.  The Parent District’s mission is to protect and enforce groundwater activities and water rights over a regional area, while ID No.1’s mission is to produce and distribute drinking and agricultural water and provide other services within its distinctive boundaries.   The Assembly Bill passed the Assembly Floor with a bipartisan vote of 78-0 and received bipartisan support in every legislative committee hearing in the Assembly and Senate and on the Senate Floor.  AB 2686 was vetted through a lengthy and rigorous public process that included numerous public meetings held at several different public agencies as well as individual meetings with community groups that expressed interest in the bill.    Unfortunately, on the last day Governor Schwarzenegger had to act on bills passed by the legislature, he vetoed AB 2686.   The legislative memorandum accompanying the veto stated that due to the record delay in the State Legislature passing the budget, the Governor was only signing bills of the highest priority for California.  The Governor vetoed 136 bills, using this common veto message, one of which was AB 2686.    Although AB 2686 was vetoed, it represented an effective and collaborative effort between ID No.1, the Parent District and LAFCo in a public process to constructively resolve their differences.  The bill received broad based support from the community and numerous agencies within and outside Santa Barbara County.  The District is grateful for all of the support it received from other public agencies and the community as the bill worked its way through the complex legislative process.    Over the next several months, the District will consider the options available to address the needs which would have been met by the passage of this legislation and anticipates working with Santa Barbara County to avoid unnecessary and costly litigation.  With impending water supply shortages on the horizon throughout California, ID No.1 must avail itself of every opportunity to enhance and protect its water supplies, improve its water supply infrastructure, and maintain beneficial relationships with neighboring public agencies.   In 2009, ID No.1 will continue conducting its business to administer and manage its water supplies and deliver reliable high quality water at the most reasonable rates possible to its customers. This year is filled with the expectations of safe and secure water supplies, the promise of unmatched service, and the offering of convenience and courteous customer interactions.   I hope that this letter has been informative.  As always, if you have any questions or desire any further information, the staff of ID No.1 is always willing to be of assistance to you, our customers.         All the best,   Chris Dahlstrom, General Manager